The cost-effectiveness of inpatient psychiatric treatment in two settings which differ with respect to direct service costs is compared. Study sites are a psychiatric unit located within a general hospital and a psychiatric health facility, both located in San Jose. A psychiatric health facility is a nonhospital program created as a less costly alternative to acute hospital treatment. All admissions and discharges to county inpatient services during the three months prior to the opening of the psychiatric health facility and a similar cohort nine to twelve months after the opening are studied. The patient groups are studied in relation to symptomatology and adjustment, controlled for age, sex, race, diagnosis, legal status, and source of payment. Subjects include patients diagnosed as schizophrenic or having schizophrenic form or personality disorders.